Talking Points:

Japanese Yen Rebounds as Nikkei 225 Decline Boosts Safe-Haven Demand
US Dollar Eyeing Durable Goods, Consumer Confidence Data to Fuel Gains
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The Japanese Yen outperformed, rising as much as 0.2 percent on average against its leading counterparts. The move lower tracked a drop in the benchmark Nikkei 225 stock index, hinting risk aversion bolstered demand for the safety-linked currency. The US Dollar corrected slightly lower in overnight trade after setting another six-month high yesterday in the wake of supportive remarks from Fed Chair Janet Yellen at the Jackson Hole Economic Symposium last week.

Looking ahead, a quiet economic calendar in European hours is likely to keep US monetary policy considerations in focus. The central issue on this front remains the expected time gap between October’s end of “QE3” asset purchases and the first subsequent interest rate hike. Near-term speculation will be informed by July’s Durable Goods Orders reading and Augusts’ Consumer Confidence gauge. The former report is expected to show an 8 percent gain, marking the largest increase in over three years. The latter is forecast to reveal a slight downtick in sentiment after the index hit a seven-year high in the prior month.

Yesterday’s soft New Home Sales figures notwithstanding, the overall trend in US economic news-flow has markedly improved since early April. Indeed, a Citigroup index measuring realized outcomes relative to consensus forecasts reflects the best performance in over six months. This hints that analysts are broadly underestimating the vigor of the US economy, opening the door for upside surprises that continue to propel the greenback upward.

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